SpaceX Just Hit A Milestone It Didn't Want: Why The Stock Fell Below Its IPO Price

After an explosive stock market debut, SpaceX has slipped below its IPO price for the first time as investors reassess the company's valuation, rising spending and future growth prospects.

With earnings and the IPO lock-up expiry approaching, the stock's next move is likely to remain closely watched.

Source : ABPLIVE AI

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Key points generated by AI, verified by newsroom

• SpaceX shares briefly fell below their $135 IPO price.
• Profit-taking and valuation concerns drove the stock decline.
• Elon Musk's net worth decreased, he remains world's richest.

SpaceX shares briefly fell below their initial public offering (IPO) price for the first time on Wednesday, marking a notable shift in investor sentiment just over a month after the Elon Musk-led company completed the largest IPO in history.

The stock touched an intraday low of $132.28, below its IPO price of $135, before recovering to close at $135.27.

The decline comes after an extraordinary market debut that briefly lifted SpaceX's valuation above $2.6 trillion and propelled Musk's fortune to unprecedented levels. Since then, however, the stock has steadily retreated as investors reassess the company's lofty valuation and future growth prospects.

From Record-Breaking IPO To First Major Test

SpaceX made history when it debuted on the stock market on June 12, completing what became the largest IPO ever.

Investor enthusiasm pushed shares sharply higher on the first day of trading. Although the IPO was priced at $135 per share, the stock opened at $150, representing an 11 per cent premium. By the close of its debut session, shares had climbed about 19 per cent.

At its peak, SpaceX's market capitalisation exceeded $2.6 trillion, placing it ahead of technology giants such as Microsoft and Amazon despite having a much shorter history as a listed company.

That optimism has gradually faded. By Wednesday afternoon, the company's valuation had fallen to around $1.78 trillion, reported The Financial Express.

Profit Booking And Valuation Concerns Weigh On Shares

Market participants point to several factors behind the recent decline.

Following the sharp rally after listing, many investors appear to have locked in profits, increasing selling pressure on the stock.

Analysts have also questioned whether the company's valuation became stretched after crossing the $2.6 trillion mark, particularly given that SpaceX reported a $4.9 billion loss last year and many of its long-term projects remain under development.

Investor concerns have also centred on the company's significant investment plans in artificial intelligence after it raised $25 billion through bond issuances to fund technology infrastructure.

Broader market conditions have added to the pressure, with expectations that the US Federal Reserve could keep interest rates elevated, weighing on highly valued technology companies.

Nasdaq-100 Inclusion Fails To Lift Sentiment

Joining the Nasdaq-100 Index often provides support to newly listed technology companies by increasing institutional ownership.

However, that has not been the case for SpaceX.

Since being added to the index, the stock has declined by around 13 per cent, indicating that broader concerns over valuation and earnings have outweighed any boost from index inclusion.

Musk's Wealth Falls Alongside The Stock

The decline in SpaceX shares has also reduced Elon Musk's personal fortune.

According to the Bloomberg Billionaires Index, Musk's net worth is currently estimated at around $850 billion.

Earlier, on June 16, when SpaceX shares traded above $225, his wealth had climbed to approximately $1.45 trillion.

Although SpaceX shares have fallen by more than 40 per cent since then, Musk remains the world's richest individual.

He continues to rank comfortably ahead of Google co-founders Larry Page, whose fortune is estimated at $290.7 billion, and Sergey Brin, whose wealth stands at approximately $268.1 billion.

Musk owns about 38 per cent of SpaceX, with the stake accounting for more than half of his overall wealth.

Lock-Up Expiry Could Be The Next Key Event

Investors are also closely watching the upcoming expiry of SpaceX's IPO lock-up period.

Once the restriction ends, employees and early investors will be permitted to sell part of their holdings, potentially increasing the supply of shares in the market.

Despite the recent weakness, SpaceX is not alone in seeing post-listing volatility.

British chip designer Arm Holdings also fell below its $51 IPO price within days of listing in 2023 before subsequently staging a strong recovery.

Research by Jay Ritter, Professor of Finance at the University of Florida, also suggests that such performance is not unusual.

According to his data, more than 70 per cent of companies that went public between 1974 and 2021 generated negative returns over the following three years compared with their IPO price.

Wall Street Remains Divided

Analysts continue to hold differing views on SpaceX's long-term prospects.

Morgan Stanley, one of the lead underwriters of the IPO, has set a 12-month price target of $300 for the stock.

JPMorgan expects the shares to reach $225 by the end of 2027.

Morningstar, however, has adopted a much more cautious stance. Last month, the research firm estimated the stock's fair value at $63 per share, substantially below current trading levels.

Earnings And Starship Mission In Focus

Attention is now shifting to two major catalysts that could shape investor sentiment over the coming months.

SpaceX is expected to report its first quarterly earnings as a listed company during the first week of August, providing investors with fresh insight into its financial performance.

The company is also preparing for the 13th Starship test flight, regarded as a key milestone for its long-term ambitions.

The successful development of Starship is central to SpaceX's strategy to reduce launch costs while supporting future projects, including orbital data centres and missions to the Moon.